Zimbabwe Fuel Prices Go Up - 2003-03-03

The Zimbabwe government has nearly doubled the price of petrol and diesel fuel. The increase comes against the backdrop of a serious fuel shortage. However, economists and fuel dealers have dismissed the increase as a non-event.

Energy and Power development Minister Amos Midzi says that the price increase is necessary, because the costs of procurement distribution and storage have gone up. A liter of petrol will now cost 145 Zimbabwe dollars – about double previous prices. Other products such as jet fuel and paraffin have also risen by about the same amount.

A manager with a fuel station, who declined to be named, said the increase is a move in the right direction, but will not solve the shortages currently being experienced.

Harare based lawyer Andrew Mugandiwa also echoed these sentiments saying, “The petrol price increase is not realistic. A liter of petrol costs less that a liter of coca cola.”

For ordinary Zimbabweans the increase means more money is needed for scarce commodities and increased transport costs.

Martha Mashonganyika, a finance clerk in Harare, says that the increase will result in more hardship. She says that many people have to board more than one Commuter Omnibus or Emergency Taxi generally known as ET’s. Ms. Mashonganyika says the current situation is going to make transportation more arduous and expensive.

“You have to board about four ET’s from home back to work and from work to home. It’s really going to be difficult,” said Ms. Mashonganyika.

Economist John Robertson says that the increase is a "catch 22" scenario for the government. He says that the price hikes will lead to workers demanding higher wages, to help cope with transport costs. Mr. Robertson adds that this will mean manufacturers have to increase prices of goods -- some of which are controlled by the government.

Mr. Robertson also points out that the fuel price increase will lead to higher inflation. According to him, Zimbabwe is likely to hit 500 percent inflation rate, as predicted by the IMF, by the end of the year. He says that the price increase falls far short of the real price of fuel at the international market. A liter of fuel costs at least one US dollar at the international market. This, according to Mr. Robertson, means that a liter of fuel must at least costs 400 Zimbabwe dollars, which is the blended rate of the recently devalued dollar. Moreover Mr. Robertson adds that merely increasing the price of fuel does not generate the much-needed foreign currency.

A coalition of government, business and labor groups, the Tripartite Negotiating Forum or T-N-F – recently recommended raising fuel prices as a way of reviving the economy.